When is a fine or settlement obscene?
Bank of America will pay $16.65 billion to settle fraud
claims by federal and state enforcement agencies and regulators that relate
back to the financial crisis of 2008. It is "the largest civil settlement
with a single entity in American history," The agreement is indeed historical
and goes far beyond the cost of doing business.
For a change, this settlement does not
release individuals from civil charges or absolve Bank of America, its
current or former subsidiaries and affiliates, or any individuals from
potential criminal prosecution. An independent monitor will be appointed
to determine if the bank satisfies its obligations and that BofA is following
the rules of the settlement.
Let's see who the stakeholders in the fine are and where the money is
going from the breakdown provided by the US Justice Department:
- Almost $10 billion will be paid to settle federal and state civil
claims by various entities related to residential mortgage-backed
securities, collateralized debt obligations, and other types of fraud
- Bank of America will pay a $5 billion civil penalty to settle a
Justice Department claims under the Financial Institutions Reform,
Recovery and Enforcement Act
- About $1.8 billion will be paid to settle federal fraud claims related
to the bank's origination and sale of mortgages
- $1.03 billion will be paid to settle federal and state securities
claims by the Federal Deposit Insurance Corporation
- $135.84 million will be paid to settle claims by the Securities
and Exchange Commission
- $300 million will be paid to settle claims by the state of California
- $45 million to settle claims by the state of Delaware
- $200 million to settle claims by the state of Illinois
- $23 million to settle claims by the Commonwealth of Kentucky
- $75 million to settle claims by the state of Maryland, and
- $300 million to settle claims by the state of New York.
Bank of America will provide the remaining $7 billion in the form of relief
to aid hundreds of thousands of consumers harmed by the financial crisis
precipitated by the unlawful conduct of Bank of America and its Merrill
Lynch and Countrywide units.
That relief will take various forms, including principal reduction loan
modifications that result in numerous homeowners no longer being underwater
on their mortgages and finally having substantial equity in their homes.
It will also include new loans to creditworthy borrowers struggling to
get a loan, donations to assist communities in recovering from the financial
crisis and financing for affordable rental housing.
Finally, Bank of America has agreed to place over $490 million in a tax
relief fund to be used to help defray some of the tax liability that will
be incurred by consumers receiving certain types of relief if Congress
fails to extend the tax relief coverage of the Mortgage Forgiveness Debt
Relief Act of 2007.
If Bank of America fails to live up to its agreement by August 31, 2018,
it must pay liquidated damages in the amount of the shortfall to organizations
that will use the funds for state-based Interest on Lawyers' Trust Account
(IOLTA) organizations and NeighborWorks America, a non-profit organization
and leader in providing affordable housing and facilitating community
development.
Source: http://www.justice.gov/opa/pr/2014/August/14-ag-884.html_truncated